The leader in the field of smart home is not making money?

A few days ago, EZVIZ Network (688475. SH) announced its 2024 financial results. According to the annual report data, in 2024, the company will achieve revenue of 5.442 billion yuan, a year-on-year increase of 12.41%; However, the net profit attributable to the parent company decreased by 10.52% year-on-year to 504 million yuan, and the non-net profit decreased by 12.63% year-on-year to 483 million yuan.

From a single quarter point of view, EZVIZ Network has begun to "increase revenue but not profit" since the second quarter of 2024, and the net profit attributable to the parent company has declined continuously for three consecutive quarters, which ultimately led to the year-on-year decline in net profit.

There are not many driving factors for smart home in 2024, from cloud response to AI empowerment, why will EZVIZ Network's net profit decline? As of the close of trading on April 17, 2025, the share price of EZVIZ Network is 34.90 yuan per share, the price-earnings ratio TTM is 53.16 times, and the total market value is 27.48 billion yuan.

Core product growth was sluggish

Frequent quality and service problems

EZVIZ Network was founded in 2015, formerly known as Hikvision's Internet business center. Initially, the company's products were mainly smart cameras; In 2016, EZVIZ Network began to explore the diversification of the product system and launched a series of smart lock products.

At present, EZVIZ Network has developed a dual main business pattern of "smart home + Internet of Things cloud platform", built a "2+5+N" product ecosystem, and has five self-developed hardware product lines including smart home cameras, smart homes, smart control, smart service robots, and smart wearables.

In recent years, the smart home industry has developed rapidly, and smart products empowered by new technologies such as the Internet of Things, cloud computing, and artificial intelligence have driven the rapid growth of the overall industry. According to the "2024 Smart Home Overseas Insight Research Report", the global smart home market is expected to reach $155.8 billion in 2024, with a compound annual growth rate of 21.52% from 2017 to 2024.

Source: Caixin Securities Research Report

However, in the context of the momentum of the macro environment, the core product of EZVIZ Network, the smart home camera, has fallen into the dilemma of stagnation of growth. In 2024, the company's smart home camera sales will be 18.3143 million units, a year-on-year decrease of 2.80%; The operating income was 2.948 billion yuan, a year-on-year decrease of 1.38%. Since its listing in 2022, with the increasingly fierce competition in the industry, the revenue of this segment's business seems to have hit a ceiling, falling and rising, and it has always been difficult to break through the 3 billion yuan mark.

Nowadays, the smart home camera market is gradually becoming saturated; At the same time, many competitors have poured into the market, and the market competition is becoming more and more fierce. Huawei, Xiaomi Group and other companies use their accumulated scale advantages in the field of smart phones and technical advantages in the field of Internet of Things cloud platform to actively expand the category of smart home products, including smart home cameras, which has brought huge competitive pressure to EZVIZ Network.

Not only that, in recent years, the privacy leakage of camera products has occurred frequently, which has become a major obstacle to the development of the smart home camera industry. For consumers, privacy and security are paramount, and smart home cameras, which should have security attributes, may now be reduced to a voyeuristic tool, this contrast greatly affects the consumer's product experience. EZVIZ Network has also had problems such as the user's camera content being cracked and sold, and its APP has also been investigated and dealt with by the Zhejiang Cyberspace Administration of China.

In November 2023, "Cyberspace Zhejiang" issued a notice showing that the Cyberspace Administration of Zhejiang has investigated and dealt with a number of illegal and illegal apps that infringe on the legitimate rights and interests of personal information in accordance with the law, and a total of 156 APPs have been named, including EZVIZ Cloud Video. According to the notice, EZVIZ Cloud Video does not clearly indicate the purpose, method and scope of collection and use of personal information; Collecting and using personal information without the user's consent; Collecting personal information that is not related to the services provided by the company in violation of the principle of necessity.

On June 7, 2024, according to Shandong Business Daily, some consumers encountered the dilemma that the EZVIZ camera could not be used after the upgrade. Although he followed the prompts of the "EZVIZ Cloud" APP to upgrade the firmware, the camera was paralyzed. What's even more dissatisfying is that after testing, EZVIZ Network actually asked for additional maintenance fees on the grounds that the product was out of warranty; Subsequently, after the media intervened, EZVIZ finally provided free repairs for the consumer.

As of April 17, 2025, there are still many consumers on the Black Cat complaint platform who "complain" about the after-sales service and product quality problems of EZVIZ Network.

Source: Black Cat Complaint Platform

The prospect of smart home is not optimistic

The payment rate of cloud platform services has been declining year by year

From industry factors to the quality and security of EZVIZ Network's own products, all these have made the former pillar of EZVIZ Network fall into a growth dilemma; However, fortunately, EZVIZ Network began to build its "second growth curve" smart home very early.

As early as 2016, EZVIZ Network began to focus on the smart home track, and in 2024, the business revenue will reach 748 million yuan, a year-on-year increase of 47.87%, which seems to be growing rapidly; However, a closer look reveals that on the one hand, this rapid growth is based on a low base, and on the other hand, there are still many uncertainties about the sustainability of its revenue growth.

From the perspective of the overall market environment, China's smart door lock market is gradually entering a mature stage. According to the latest data from Lotu Technology (RUNTO), in 2024, the omni-channel sales volume of China's smart door lock market will be 17.47 million sets, a year-on-year decrease of 3%. This indicates that the market growth rate is gradually slowing down, and it is difficult to reproduce the ultra-high growth rate in the short term. In such an environment, EZVIZ Network's smart home service is facing huge challenges to achieve sustained and rapid growth.

IoT cloud platform services are another core business segment of EZVIZ Network, with revenue of 1.052 billion yuan in 2024, a year-on-year increase of 22.87%, accounting for 19.3% of total revenue. The business of this segment can be divided into C-end value-added service revenue and B-end developer customer income. Although the annual cumulative number of active users and paid users of EZVIZ Network is on the rise, the company's payment rate has declined. From 2022 to 2024, the company's C-end payment rates will be 10.78%, 10.00%, and 9.72% respectively, declining year by year; The company's B-side payment rate is not as good as that of C-side, which has remained at about 3% in the past three years.

Source: EZVIZ Network's 2024 annual financial report

The three fees increased together, and the gross profit margin declined

Compress profit margins

In 2024, EZVIZ Network's net profit attributable to the parent company will decline, and the increase in expenses is one of the important reasons. In 2024, the company's management expenses, sales expenses and R&D expenses will all increase to varying degrees, and all of them will hit new highs after listing.

Among them, sales expenses have the fastest growth rate among the three operating expenses, with an annual sales expense investment of 858 million yuan in 2024, a year-on-year increase of 23.19%, and an increase of 1.37 percentage points to 15.77% compared with 2023.

At the same time, due to the company's increased R&D investment in new products and new processes in 2024, the company's R&D expenses increased by 11.35% year-on-year to 814 million yuan. Although R&D investment is crucial for the long-term development of enterprises and helps to enhance product competitiveness and innovation capabilities, in the short term, the sharp increase in expenses undoubtedly brings greater pressure to the company's profits.

In addition to the increase in expenses, the decline in the gross profit margin of EZVIZ Network's products also had a negative impact on the company's profitability. In 2024, the gross profit margin of EZVIZ Network's smart home products will decline by 1.36 percentage points year-on-year to 34.02%. As the smart home products segment accounts for a large proportion of the company's business, the decline in its gross profit margin directly affected the company's overall gross profit margin performance, making the company's overall gross profit margin of 42.08%, down 0.77 percentage points year-on-year.

A combination of factors has led to a decline in the company's net profit while its cash flow has also declined. In 2024, the company's net cash flow from operating activities will be 548 million yuan, a year-on-year decrease of 43.44%, mainly due to the increase in cash for the purchase of goods and payment for labor services during the reporting period.

EZVIZ is still the leader in the field of smart home, but under the impact of new technologies such as AI, the company has to continue to maintain or even increase investment in technology, services and sales. Whether it is the stagnation of core product growth, or the growth of expenses and the decline of gross profit margin, the company's management needs to attach great importance to it and take practical and effective measures to solve it in order to cope with the fierce market competition. (Produced by Money Weekly).